Buying a Home in Retirement (Pros and Cons)

I received a call the other day from a man that said he was 92 years old and wanted to buy a home. Our conversation made me ask myself the question: “Is it was WISE for him to do so”. While I’m not anywhere close to that age, I’ve been a licensed Realtor® long enough to know that there are some PROS and CONS of buying a home when we’re retired. You may think that as a Realtor® I’m all about selling homes to everyone, focusing ONLY on the pros, but I may surprise you here, so stick around for the cons, because some of them should be taken VERY seriously.

Build Equity

Let’s jump right into a few of the PROS of buying a home in retirement. Perhaps the first pro of buying a home in retirement is that you’re able to build equity through financing. Although cash purchases save on the interest expense, retirees sometimes often defer payments through a mortgage. On thing that many don’t know is that mortgage companies don’t usually consider age when considering an applicant’s ability to be approved to purchase a home with financing.

Appreciation

Retirement may last a long time, and appreciation can play a major role in building equity. Who knows? Maybe this is NOT your forever home? Maybe in five years you’ll want to move to your NEXT forever home. Home buyers are always telling me they’re buying their forever home, often in their 20’s or 30’s, but it’s very seldom the case. If you end up deciding to move in, say, that five years, home appreciation could make a big difference in your overall financial picture, giving you more options.

Equity has its advantages. It can be utilized for a home equity line for vacations, or unexpected expenses like replacing the roof or air conditioning system if income is not an issue. While I’m not advising that it’s wise, I’ve used my home’s equity for investing and it worked great for me.

Legacy

When you pass, that equity might be passed along as part of your legacy. Be sure to check with an attorney experienced in estate planning to ensure your wishes are properly stated though. Otherwise, probate could be a real problem for whomever inherits your estate.

Security

Buying a home in retirement provides a lot of security. You can know with relative certainty where you’ll spend the remainder of your days. Should physical handicaps become necessary, these accommodations can be made relatively easily and be tailored to your specific needs.

Doing it MY way

Another pro of buying a home after 60 is that you don’t have to worry about massive rent increases, or changing landlord requirements, like having to move because the landlord no longer wants pets in his or her home. Yes, buying a home does have some expenses, like taxes and insurance, and maintenance, that do tend to rise, but those increases are usually able to be predicted in advance.

Tax benefits?

There may be tax benefits of buying a home in retirement, too. I’m not a tax advisor, but there could be property tax credits for retirees, depreciation benefits, and others. Check with your tax advisor for more on these as it can vary quite a bit from state to state.

Cons to buying a home in retirement

While my team and I LOVE helping EVERYONE buy a home, there are some CONS to buying a home in retirement. The first con to buying a home in retirement is the maintenance and repairs that come along with home ownership. As I write this today, a new roof for a typical home here in Central Florida could cost over $20,000 and a new air conditioner could get you for another $10,000. If you don’t have reserves this could be a catastrophic expense, and one that you just don’t have when renting.

Headaches/worries

While the expenses of owning a home can be burdensome, the headaches and worries of maintenance and repairs of home ownership could be even worse than the financial issue. Let’s face it. As we get older things just aren’t as easy as they used to be, so simple tasks like cleaning out those gutters now require the expense, and even worse, finding a trustworthy person to handle this seemingly small job. As we age, emotions can be skewed, and the worries of these repairs can be debilitating. Knowing that a landlord is responsible for repairs to the home can be a huge advantage to renting a home.

Consequences of deferred/ignored maintenance

When I’m meeting with retirees that are considering selling, routine maintenance is an often overlooked problem that I encounter. It’s common that seemingly minor repairs are overlooked and become major problems for these retirees. I’m sure some of you are saying “I’m 65 and I’m doing just fine”, but I’ve seen some in their 60’s that aren’t doing so well at all.

I’ve seen it more than once that a retiree sold for thousands less by waiting too long to sell their home when maintenance was ignored for extended periods. If you’re renting, this isn’t a concern. I’ve seen this more often when retirees were alone, without familial support. So, if you’ve got good support from friends and family, maybe this isn’t an issue for you, but it is for some.

Before I get to an often overlooked con to buying a home after 60, if you’ve got real estate needs anywhere in Central Florida, just pick up the phone and give me a call. I get those calls all the time.

Costs of buying and selling

While home ownership has some financial benefits, costs to buy and sell can be HUGE expenses that are often overlooked, and NOT part of the rental equation. Purchasing a home could cost over 2% and selling could run over 7%, which is a lot of money and should not be overlooked. Yes, over time, these costs are defrayed, but you just don’t have this concern when renting.

Lack of flexibility

Another con to buying a home in retirement is the lack of flexibility. Should you want, or NEED to move for some reason, selling a home can be a major headache, especially if you’re much older and are dealing with decreased cognitive function. Of course, being forced to sell in the wrong market can force you to give up that equity I spoke of a bit ago, but it could also potentially take several months to sell, whereas walking away from a rental could be expensive, it’s comparably less than with purchasing a home when you’re older.

If you’re considering assisted living, here’s a great site to answer your questions about it. www.caring.com